M/s Lloyds Steel Industries Ltd., Vs. The Commissioner of Customs (Imports) Custom House and Others - Court Judgment

(Prayer: Petition filed under Article 226 of the Constitution of India praying for issuance of a writ of Certiorari, to call for the records of the second respondent culminating in the detention notice dated 25.11.2004, issued from File S37/124/90-Gr.6 and quash the same. )

1. Heard Mr.S.Murugappan, learned counsel appearing for the petitioner, Mr.V.Sundareswaran, learned Senior Panel Counsel and Mr.T.M.Hariharan, learned Standing Counsel for the third respondent and with the consent of the learned counsel appearing on either side, the Writ Petition is taken up for final disposal.

2. The petitioner has filed this Writ Petition, challenging detention Notice dated 25.11.2004. The said detention notice came to be issued consequent upon the order passed under section 28(2) of the Customs Act, 1962, dated 30.08.2002. The petitioner had registered a project contract vide File No.S37/124/90 for import of components and reactors and agitators for fabrication and supply of leaching purification plant to Tamil Nadu Magnesite Ltd. The petitioner/importer filed a Bill of Entry for warehousing the goods and accordingly the goods were warehoused. It appears that the goods were not cleared, because the project did not take off and in the meantime, the petitioner also shifted their office and notified the shifting by issuance of Public Notice in the Press on 29.11.2000. In the interregnum, it appears that notices were sent by the second respondent on various dates with regard to the proposed action under section 28(2) of the Customs Act, 1962. The notice states that the petitioner failed to produce the required documents for finalisation of the project import and was called upon to show cause as to why the amount of Rs.1,10,00,000/- should not be recovered from them. Since, notices were not responded and the petitioner did not appear before the second respondent, the proceedings were finalised exparte, by an order dated 30.08.2002, by stating that the petitioner cleared the consignment as project contract, but they failed to produce the required documents as per section 7 of the Project Import Regulations,1986 for finalisation of the project. Therefore, the demand of Rs.1,10,000/- was confirmed with interest under section 28 (2) of the Act.

3. However, the action initiated by the other Wing of the Customs Department, viz. the Department under the control of the first respondent was not brought to the notice of the second respondent. Since the goods were bonded in the warehouse and a Bank Guarantee was given by the petitioner for a minimum sum of Rs.5,50,000/- and the goods having not been cleared within the statutory period, the Customs Authorities have brought the goods for sale and the sale was completed and taken delivery by the bidder on 25.10.2000 and 30.10.2000. This is evident from the communication given by the Warehouse Manager to the second respondent dated 07.01.2005. The said communication was in response to the letter written by the second respondent dated 06.01.2005.

4. Thus, if the goods have already been sold and the sale proceeds have been deposited with the Customs, parallely, the second respondent cannot insist on compliance of the demand, as confirmed by an order dated 30.08.2002. In other words, both the proceedings cannot be simultaneously initiated as it would result in conflicting orders.

5. At the time, when the Writ Petition was entertained, an interim order was granted on the ground that the petitioner had furnished a Bank Guarantee covering the entire amount. However, it was subsequently, brought to the notice of the Court by the third respondent that the petitioner's Bank Guarantee dated 06.07.1990 was valid only upto 26.01.1991 and the same stand cancelled on 28.01.1993. Thus, the respondent Department cannot make a claim against the third respondent Bank and this observation would protect the interest of the third respondent Bank.

6. For the reasons assigned in the preceding paragraphs, this Court is inclined to issue appropriate directions to the second respondent to take note of the subsequent events, the fact that the goods in question were sold and the sale proceeds have been remitted to the Customs Department, for which purpose the order passed by the second respondent requires to be set aside.

7. In the result -

(i) The relief sought for by the petitioner is molded and the order passed by the second respondent dated 30.08.2002, under section 28(2) of the of the Customs Act is, set aside. Consequently, the impugned detention notice dated 25.11.2004 is set aside and the matter is remanded to the second respondent for fresh consideration, who shall take note of the subsequent developments pertaining to the sale of goods, after affording an opportunity of personal hearing to the petitioner and pass fresh orders on merits and in accordance with law, within a period of three months from the date of receipt of a copy of this order.

(ii) As the learned Senior Panel Counsel for the respondents 1 and 2 pleaded that it is very difficult to locate the petitioner, the second respondent is directed to fix the date of first personal hearing as 29.08.2014, and no separate notice need be issued by the second respondent and the petitioner shall appear before the second respondent on the said date without fail. No costs. Consequently connected Miscellaneous Petitions are closed.